LOAN PORTFOLIO

Loans and advances totaled $35.7 billion as at 30 September 2005, an increase of $1.7 billion or 5% over 30 September 2004.

The aggregate amount of non-performing loans amounted to $1.61 billion compared to $1.47 billion as at 30 September 2004. The additional provision for credit losses for the financial year was $61.4 million compared to $422.3 million for the corresponding period of the prior year, a decrease of 85%.

As at 30 September 2005 the accumulated provision for credit losses of $1.97 billion represented an overall coverage of 122% of non-performing loans. Provisions for credit losses that exceed the amounts required by International Financial Reporting Standards (IFRS) are credited to a non-distributable Loan Loss Reserve. As at 30 September 2005 the balance in the Loan Loss Reserve was $211.6 million. The Bank’s provisioning policy is in compliance with the Bank of Jamaica regulations.

BALANCE SHEET

The Group’s total assets as at 30 September 2005 was $193.6 billion, a growth of $17.7 billion or 10% compared to 30 September 2004. The increase in the asset base is mainly attributable to the growth in trading securities, reverse repurchase agreements and investment securities of 644%, 20% and 16% respectively.

The growth in the asset base over the year was mainly funded as follows:

	INCREASE
	$B	%
Customer Deposits	4.5	5.6
Repurchase Agreements and Promissory Notes	4.7	10.0
Securitisation Arrangements	1.2	13.3
Policyholders' Funds	2.2	31.2
Stockholder’s Equity	4.8	29.2

CAPITAL

As at 30 September 2005 the Group’s total stockholders’ equity was $21.05 billion, an increase of $4.8 billion or 29.2% when compared to September 2004. As at 2005 September 30, the Risk-based Capital Ratio was 19.07% which is in compliance with the minimum requirement of 10% by the Bank of Jamaica.

DIVIDENDS

At the Board of Directors meeting held 27 October 2005, an interim dividend of 20 cents per share (total cost J$493,352,600.00) was approved. The dividend is payable on 25 November 2005 for shareholders on record as at 11 November 2005.

SUBSEQUENT EVENT

On 27 October 2005, NCB Insurance Company Limited (a subsidiary of the Bank), Environmental Health Foundation Limited and Blue Cross of Jamaica signed a shareholders’ agreement for the subsidiary to purchase 75% of Blue Cross of Jamaica Limited. The transaction is subject to approval by the Jamaican regulators and Blue Cross/Blue Shield international.

The Bank has not disclosed the effect of this proposed acquisition in the financial statements as details of the transaction have not been finalised and the transaction is still under negotiation.

BASIS OF PREPARATION

These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), and have been prepared under the historical cost convention as modified by the revaluation of available-for-sale investment securities, trading securities, derivative contracts, investment property and certain property, plant and equipment

As at 1 October 2004, the bank has adopted IFRS 3 (Business Combinations). This has resulted in the transfer of the negative goodwill arising on acquisition of associates to retained earnings. Positive goodwill is assessed annually for impairment and is no longer amortised.

One of the bank's subsidiaries, NCB Insurance Company Limited, has not opted for the early adoption of IFRS 4 (Insurance Contracts). The results as at 30 September 2005 do not incorporate any adjustment that would arise from such adoption.

Where necessary, comparative figures have been reclassified to conform with changes in presentation in the current period. The segment report for 2005 reflects a break-out of banking into Retail, Corporate and Treasury and the prior year restated accordingly.

All amounts are stated in Jamaican dollars unless otherwise indicated.

COMMUNITY RELATIONS

During the 2004/5 financial year, the Organization continued its tradition of working with our employees, communities and organizations to fulfill its mandate of making a positive impact on the economic and social well-being of Jamaica.

The NCB Jamaican Education Initiative (JEI) entered its second year of operation, thanks to the contribution of 1% of purchases made by our Keycard customers, JEI was able to continue to support our nation’s Education sector. JEI underwrote the cost of examination fees for 13,000 students sitting the Caribbean Examination Council (CXC) examinations in Principles of Accounts and Principles of Business. The JEI also hosted a workshop in February to help teachers to better prepare students for those examinations.

In November 2004, the NCB Foundation announced the establishment of a $7 million CXC Math Programme. This programme is aimed at improving teaching skills and student proficiency in the subject of Mathematics. Six high schools have been selected for the pilot project, which is headed by Mr. Radley Reid, noted educator.

The Organization also continued to support activities that contribute to the economic development of the nation. Our sponsorship of the Jamaica Observer’s Business Leader Awards, held in April, highlighted the organization’s support for entrepreneurship by honouring a group of successful proponents.

NCB also became a major sponsor of a Global Entrepreneurship Monitor (GEM) Project, undertaken by the University of Technology Jamaica (UTech) and a consortium of other Universities and research institutes. This project seeks to assess how entrepreneurial activity contributes to national and international economic prosperity and steps governments can take to enhance the level of entrepreneurial activity.

NCB also was a main sponsor of “Youth Biz”, a seminar presented by the Public Sector Organization of Jamaica, which exposed youth to entrepreneurial concepts. A similar alignment with young Jamaicans was made through our sponsorship of “Youth Fest” which was a seminar hosted during the Jamaica WellFest symposium, and which exposed participants to lifestyle concepts and career opportunities in Health & Wellness.

In order to support economic activity and demonstrate patronage for our customers, NCB participated in a number of events including: Children’s Expo, Portmore Week, Education Expo, the Jamaica Employee Federation Conference, Home and Hardware Expo, the Hague Agricultural Show in Trelawny, Montego Bay Trade Expo, Horizon Technology Showcase & Exposition, China Caribbean Economic Trade Forum, the inaugural Annatto Festival held in St. Mary and the National Spelling Bee competition among others.

Our support of the communities in Jamaica remained unwavering. NCB Chairman, Michael Lee-Chin, contributed on behalf of the Bank, $2 million to the Rotary Club of Kingston in order to develop the area beside the Dunrobin Primary School, formerly referred to as ‘the dustbowl’, into a landscaped park for sports and other recreation activities.

During the year, NCB re-committed its ardent support and sponsorship of the JMA’s ‘Buy Jamaican, Build Jamaica’ campaign. The programme aims to promote the usage and raise the awareness of products which are produced locally.

To help with disaster preparedness activities, NCB committed $1million towards the National Labour Day project, which was the building of a model shelter in St. Elizabeth and also donated $4 million to efforts to stem flooding in Downtown Kingston and its environs.

Crime Stop also received a donation in support of their efforts to fight crime. In June, Annotto Bay’s Police Station was reopened after receiving extensive renovation from a coalition of corporate entities, including NCB. In addition, NCB has given significant support to the development of a model policing facility in Grants Pen that will integrate policing presence with community services. It is projected that this facility will be duplicated islandwide and will assist in controlling crime.

Our support for the youth, arts and sports remained strong during the year. NCB promoted excellence in our youth by sponsoring the Boys and Girls High School Relays at the second staging of the Jamaica International Invitational Meet, at a cost of US$20,000. NCB sponsored the National Fine Arts Competition organized by Jamaica Cultural Development Commission (JCDC), which aims to showcase the nation’s artistic talent and preserve our cultural heritage.

Our employees continued to provide sterling support in our communities and service organizations throughout Jamaica. During this financial year, a disaster relief drive was organized and NCB employees contributed over $300,000 worth of food, clothing and other critical relief supplies. The donation was handed over to the Jamaica Red Cross for distribution.

We re-affirm our belief in Jamaica and thank all those with whom we worked during the year to make a positive contribution towards building a better Jamaica.